Strategies for Making Money

Build Wealth in Troubled Times

The smartest and bravest minds in finance tell us how to weather the unpredictable

IF THIS ROLLER-COASTER economy has you feeling stressed and confused, you're not alone. Mixed messages are coming from every corner. The government has been trying to encourage us to spend and borrow by keeping interest rates low. The finance industry keeps urging those of us with still-decent credit to buy houses, apply for new credit cards, and try out hot new investments. But we've been burned before. Why should we put money on the line when jobs are still insecure and markets are about as stable as the Washington Monument in a 5.8 temblor?

When the financial deck seems stacked against the common guy, it's hard to know who to trust. So we turned to some of the few people who saw the financial crisis of 2008 coming. This elite cadre of traders, economists, and money managers had the courage to speak out about the building storm, earning the derision of their peers and clients—until history proved them right. We asked this crew how to survive and thrive through the next crisis. They argued the importance of saving heavily, keeping debt low, and investing in your own career—but beyond those basics, their views diverged radically and often contradicted. Some of their prescriptions are unorthodox and unproved, and just because these experts were right once doesn't mean they know what's right for you. On the other hand, whose advice are you taking now?

Don't Lose Hope

FRANK PARTNOY

CLAIM TO FAME: Called out Wall Street excess

It's only natural to believe that the future will look a lot like the past. Just as many of us had assumed that the most recent boom would last forever, we might also assume that today's bust will persist as well. Finance professor Frank Partnoy, of the University of San Diego school of law, wants to avoid that mistake. Partnoy, the author of F.I.A.S.C.O.: Blood in the Water on Wall Street, was a successful Wall Street trader who turned his back on his former colleagues to warn that their excesses would lead to catastrophe. He doesn't think Washington's reforms have done enough to rein in those excesses, but he has enough faith in America's economy to believe it can ride out the busts.

Take the long view.Partnoy recommends a long-term strategy for retirement. Pick out about a dozen companies that sell products you know and understand, and research them. You'll still be taking risks, but at least you'll understand those risks. Buy the stocks and then forget about them. Research shows that investors tend to buy stocks when the prices are high and sell them when they're low. That's the fastest way to lose money in the market. "You need to resist the short-term temptation to buy and sell based on what's hot and what's not," Partnoy says.

Have some faith.Unlike other advisors, Partnoy thinks stocks are a good buy for the long run. He arrived at that perspective by studying history—particularly the Great Depression, when dire predictions about the future were rampant. "Over the long run, our economy grows," Partnoy says. "People become better off, and technology improves our lives. If you come out of the blogs and news feeds and look at the arc of history, it's a story of human beings getting better over time. So stay optimistic."